Saving a few dollars today can add up to a lot of money later on – cash that you can use to start investing, pay off your debt repayment, or save for retirement.
But to ensure you have a clear direction and achieve what you want, you need to start setting financial goals – that is, if you haven’t done so yet.
While a lot of people associate financial goal setting with business, it’s something anyone can and everyone should do. In this post, we’ll discuss why making financial goals is essential and provide tips on how to do so.
Setting financial goals – the basics
The specific objectives you set when it comes to your own finances are called financial goals. The goals you choose are tailored to your financial situation, and they provide you with definite benchmarks to strive for.
Your financial goals spell out the desired results of your short-, medium-, and long-term financial decisions. To illustrate, below are examples of short-, medium-, and long-term financial goals.
Your short-term objectives help you build the foundation and confidence you need to accomplish longer-term, more ambitious goals.
- Create a weekly or monthly budget and stick to it.
- Build an emergency fund.
- Pay off credit card debt.
Once you achieve (or nearly accomplish all) your short-term financial goals, you have the foundation needed to follow through on midterm objectives.
Medium-term objectives serve to bridge your short- with your long-term goals.
- Get life and disability insurance.
- Reduce or pay off your student loan or any major debt.
- Save for your dream home or children’s education.
Your long-term financial objectives are meant to prepare you for future needs and challenges. This is why these goals typically involve preparing for retirement.
To make sure you’re saving enough, you need to determine how much you’ll actually need to retire comfortably.
While your superannuation is considered a retirement investment, it may not be enough to cover your financial requirements later in life.
You need to take your future health and mobility needs into consideration, even if you’re physically fit currently. You also need to factor in inflation, as the cost of goods and services today wouldn’t be the same years or decades from now.
So, aside from saving for retirement, you might want to consider investing in long-term, low-risk investments like mutual funds and savings bonds. Or you could also go for high-risk, high-yield investments with the help of a stockbroker or your financial advisor.
Benefits of financial goal setting
Creating financial objectives is a crucial first step toward financial success, security, and stability.
In particular, financial goal setting provides the following benefits:
- Establishing clear goals enables you to create achievable plans.
- It provides a benchmark for monitoring your progress.
- It keeps you accountable for the results.
- Making a list of goals helps in setting priorities.
- Tracking your progress can inspire you to achieve more.
So, if you have yet to set financial goals, do so today.
If this article has inspired you to think about your own unique situation and, more importantly, what you and your family are going through right now, please contact your advice professional.